New Live Nation adds on swap; Allegheny Technologies active; Spirit Realty strengthens

By Rebecca Melvin

New York, May 20 - Live Nation Entertainment Inc.'s new 2.5% convertibles gained on swap Tuesday after the Los Angeles-based concert promoter and music venue manager priced $250 million of the senior notes at the rich end of talked terms.

The new bonds ended the session at about 101.5 bid, 102 offered versus a share price of $22.74, which was Monday's closing stock level, so the paper added 1.5 points to 1.75 points for initial purchasers of the bonds, a syndicate source said.

Live Nation's existing 2.875% convertibles, which are being redeemed with proceeds of the new deal, traded around 100.5, which represented about a 1-point drop since late last week, the syndicate source said.

Elsewhere, Allegheny Technologies Inc.'s 4.25% convertibles traded very actively as traders eyed the steel maker's stock price ahead of the bond's looming June 1 maturity. But pricing was little changed.

The stock price has been moving around but is close to the conversion prices so, "all eyes are on this name. It was the biggest trader on the day on Trace," a New York-based trader said of Allegheny Technologies.

The stock has moved up and down about $3.00 in the past few days, the trader said. "But it doesn't matter as long as it keeps moving."

Spirit Realty Capital Inc.'s two convertibles that priced last week were seen edging up in active trade and strengthening after a couple of lackluster days.

Otherwise, market players were hoping for more new deals before the long holiday weekend for Memorial Day.

"I think guys are glad for the little uptick in new deals that we've seen, and they are hoping for more," a trader said.

But no new issues were launched on Tuesday, which was viewed as an important day of the week for the primary market in light of the upcoming holiday that is likely to curb market activity as the week progresses. But Post Holdings Inc. is on the calendar to price $200 million tangible equity units late Wednesday.

Equities traded lower. The Dow Jones industrial average fell 137.55 points, or 0.8%, to 16,374.31, the S&P 500 stock index lost 12.25 points, or 0.7% to 1,872.83, and the Nasdaq Composite stock index dropped 28.92 points, or 0.7%, to 4,096.89.

Live Nation adds on swap

Live Nation's newly priced 2.5% convertibles ended the day at about 101.5 bid, 102 offered versus an underlying share price of $22.74, which was Monday's close and the bond deal's stock reference price.

The notes added about 1.5 points to 1.75 points on swap for initial purchasers of the bonds.

Early in the session the new bonds were quoted at 101.125 bid, 101.625 offered with the stock a few cents lower at $22.65. The stock price was a few cents lower than the stock reference price of $22.74.

Live Nation shares actually gained 27 cents, or 1.2%, to $23.01 on the day.

The older Live Nation 2.875% convertibles, which are being redeemed by the company with proceeds of the new deal, were seen at 100.5 bid, 100.75 offered. That was down from last Thursday when the bonds were at 101.625, a New York-based trader said.

"They have lost a point," he said of the older Live Nation convertibles.

Pricing of the new Rule 144A deal came at the rich end of talk, which was for a 2.5% to 3% coupon and a 47.5% to 52.5% premium.

Live Nation also priced $250 million of 5.375% straight notes due 2022. Each offering has a $25 million over-allotment option.

Goldman Sachs & Co. and J.P. Morgan Securities LLC were the joint bookrunners of the convertibles deal.

In addition to using proceeds to redeem Live Nation's outstanding 2.875% convertible senior notes due 2027, the company will use proceeds from the two deals to reinvest in the company's core business and for general corporate purposes, including potential acquisitions.

Allegheny paper busy

Allegheny Technologies' 4.25% convertibles due June 1 traded very actively at just over par or 100.5, while shares of the Pittsburgh specialty steelmaker moved down 80 cents, or nearly 2%, to $40.68.

With only a little less than two weeks before the bond's maturity, traders are watching the stock price, which is very close to the bond's conversion price at $40.81.

"The stock is off nicely today on bad China housing data. But guys don't care as long as it keeps moving," a New York-based trader said.

Market players don't care if the shares go down because the bonds are going to be redeemed at par regardless of the stock price. Meanwhile, if there is a spike in the stock price, the price of the bond is going to pick up more delta or equity sensitivity, relative to the stock and convert hedge players will make more money on the deal.

"The strike is literally right here. Traders like the convexity," he said.

The Molson Coors Brewing Co. and Regis Corp. also had convertibles that matured when their stock was close to the strike price, a second New York-based trader said.

Allegheny is a steel producer that depends on demand from emerging markets such as China. The disappointing housing numbers out of China overnight zapped the stock on Tuesday, the first trader said.

Spirit Realty active

Spirit Realty's 2.875% convertible due 2019 traded at 101.17, according to Trace data, with the shares at about $11.40. That compares to 100.625 bid, 101 offered at versus an underlying share price of $11.36 at the end of Monday.

Spirit Realty's 3.75% convertibles due 2020 traded at 101.253, according to Trace data, against the $11.40 stock price. That compares to 100.75 bid, 101.25 offered versus the $11.36 share price at the end of Monday.

The underlying shares of the Scottsdale, Ariz.-based real estate investment trust ended down about 0.6% at $11.28, after trading up about 0.5% initially Tuesday.

The strengthening in the bonds was overdue, a trader said.

"The bonds were hot on deal day, but they hadn't changed price since day one. Today, they needed to catch up," the trader said.

Mentioned in this article:

Allegheny Technologies Inc. NYSE: ATI

Live Nation Entertainment Inc. NYSE: LYV

Post Holdings Inc. Nasdaq: POST

Spirit Realty Corp. NYSE: SRC

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